To put it mildly—by her own account—Chancellor Rachel Reeves’ government would concentrate on increasing spending on war. She thinks it’s especially important now for strengthening energy security with tensions in the Middle East increasing. So when Chancellor of the Exchequer, Rt. Last week, she unveiled the government’s spending plans for the remainder of the parliamentary term. She stressed an urgent need to protect the UK economy from the adverse effects of the burgeoning conflict between Israel and Iran.
As Reeves announced, the Labour government would leave no stone unturned in ensuring the protection of UK citizens. Yet they remain determined to protect the public from the resulting economic impacts of these global changes. She noted that the Middle East situation is central. This passion and urgency has led the Biden government to double down on spending—overtly—on defense and humanitarian goals alike with billions for defense & energy security initiatives.
The Chancellor acknowledged that most of the proposed investments will take years to complete. The good news is that there are some planned initiatives that could provide more immediate benefits. One such initiative, for example, is the significant investment in home insulation to help all households improve energy efficiency and cut costs.
Reeves stressed that the UK economy needs to be “really strong.” That strength is more important than ever for addressing the growing challenges it faces today. Global oil prices have already skyrocketed as a result of recent Hamas attacks on Israel and consequent Iranian reprisal. If the military hostilities persist, attacks on catalyzing shipping passageways, including the Strait of Hormuz, would add upward pressure to oil and gas prices, creating even larger climate-related worries.
The price of a barrel of oil is sitting around $75 today, down from the start of this year. Household energy bills lag behind swings in wholesale energy markets. This added delay will complicate efforts to combat costs for consumers as inflation continues to be a crisis. As the government lifts the energy price cap in July, average energy bills calculated on this price cap are set to decrease. Future pricing trends are not without their own future uncertainty, however.
Opponents of the incumbent administration’s policy direction have said that this government has gone down the wrong track, punishing businesses with higher taxes. As one source inside the administration told us, it’s bad enough to have these fiscal policies in the face of increasing economic pressures.
Former BP chief executive Lord John Browne pointed to the dire outcome of not acting on energy security. He urged a quick move from fossil fuels to renewables. He stressed that now is the moment to “go very, very hard” on advancing sustainable energy solutions.
Reeves reinforced her commitment to addressing these pressing economic issues, stating, “There is no complacency from myself or the Treasury.”